A vicious attack on two Israelis, a soldier and a settler, who strayed in their car into the Palestinian area of Ramallah recently, was a graphic indication of the current level of anger among Palestinians in the Occupied Territories.

The event provoked the strongest Israeli reaction since the signing of the Wye River Memorandum between Israel and the Palestinians.

It came after a series of Israeli moves since the signing of the Wye River Memorandum in October which have once again brought the atmosphere among Palestinians to boiling point:

• Although the Memorandum resulted in the opening of the first Palestinian airport in Gaza, the ensuing period has also seen the intensification of Israel's settlement activity in the West Bank.

  There have been dozens of offical land confiscations and illegal land grabs by settlers which seem bound to limit the area Palestinians will receive in final status negotiations with Israel.

• Another blow was the stabbing to death of a Palestinian man in Jerusalem. Palestinians say the Israeli police are not doing enough to solve a series of similar stabbings in Jerusalem believed to have been committed by an Israeli ultra-nationalist.

• More anger has been caused over Israel's refusal to release hundreds of Palestinian security prisoners who have been held by the Israelis since before the Oslo peace process began in 1993.

Binyamin Netanyahu's cabinet is said to have watched TV pictures of the attack on the two Israelis and the cabinet decided unamimously to suspend the Wye River agreement.

New conditions

Shortly afterwards, an Israeli spokesmen announced Israel was imposing new conditions on the Palestinian side before the next stage of transfering occupied territory to Palestinian control.

Israeli officials say it is impossible to continue with the Wye agreement while Israelis are subject to random attacks by Palestinians. They blame the Palestinian leadership for inciting this situation.

Protests in support of Palestinian prisoners have turned violent

The new conditions would oblige Yasser Arafat to abandon his intention to declare an independent Palestinian state when the implementation period for the interim agreement with Israel runs out in May 1999.

The Palestinians would also have to agree to Israel's interpretation of which Palestinians prisoners are eligible for release under the Wye agreement.

Both Palestinians and the Israeli opposition have accused the Israeli prime minister of exploiting what they saw as an isolated attack to evade Israel's obligations.

The question for Clinton

Mr Netanyahu's critics have always feared he would try to stall implementation of the Wye agreement by provoking violence from the Palestinian side.

It is an agreement they say he never wanted but was unable to avoid because of American pressure to "bring the peace process back on track."

America has called Israel's new conditions "inappropriate." For Washington, this is an unusually blunt and public criticism of Israel.

The question being asked now is whether President Clinton, who is due to visit Israel and the Palestinian areas shortly, can do anything to prevent further descent into violence and kindle a spirit of peace.